Cramer: Diamond investing—Portfolio's best friend?

A jewelry company that most people have never heard of is somehow crushing its competition. What the heck? Jim Cramer was intrigued enough to find out what prompted a little-known stock like Signet Jewelers to have such an impressive run.

Signet is behind jewelry store chains such as Kay Jewelers, Zales and Jared, among others. And while most people can recognize its advertisements, they don't know the company involved.

Yet, it has been quietly working its way higher, with a monster 25 percent move since its late-August lows, powered by the fact that it reported a great quarter that month. It is the largest specialty jewelry chain in the U.S., Canada and the U.K.

Meanwhile, Tiffany & Co has delivered disappointing quarter after quarter, with its stock down 26 percent for the year. If Cramer didn't have Signet on his radar, the Tiffany's stock would make him think that jewelry had gone out of style.

"Let me walk you through this story, which I think is worth examining in part because while I'm sure most of you have heard of Jared or Kay Jewelers, I feel like the parent company, Signet, is actually unknown to a great many people," the "Mad Money" host said.

"I can't blame any of the buyers who are crowding into this one, because the company has a lot going for it"-Jim Cramer

Last week, Signet was added to Wells Fargo's priority stock list with an outperform rating. A big part of Signet's success goes back to its smart acquisition of Zales last year for $1.4 billion. This was a 41 percent premium to where Zales had been trading the day before. However, it turns out that Signet got an amazing price, and Cramer thinks this is only the beginning of the potential value that Signet could unlock from the deal.

"Since Signet reported at the end of August, the stock has been absolutely screaming, and I can't blame any of the buyers who are crowding into this one, because the company has a lot going for it," Cramer said.

Cramer also likes the position that Signet has in the extremely fragmented $41 billion U.S. jewelry market. In an industry where no other specialty jewelry store has more than a 1 percent market share, Signet has 14 percent of the market share in the United States. Stores like Tiffany, Cartier and Pandora combined only account for 5 percent of the total industry.

Most importantly, Signet has scale. That helps Signet to control costs, and do in-depth consumer studies to figure out what kinds of jewelry people want.

When he put it all together, Cramer found that Signet is perfectly positioned to continue taking market share from its smaller competitors. It is also protected from Web-based competition like Amazon, since most people want to try on jewelry before buying it.

"Why am I recommending this stock up here, just three points away from its all-time highs? Simple, because I think this stock has more room to run," Cramer said.

Given the fact that the stock is cheap, at just 18 times next year's earnings estimates, it is clear to Cramer that it is a screaming buy.

S, after researching this stock further, Cramer found that Signet could be an investor's best friend. The stock has simply roared higher because the company is doing better. All signs point to the company doing even better in the future, and that means Cramer is ready to buy buy buy.